Provided by Mercer - CERS Investment Adviser
closed out the month with losses after reaching fresh highs in mid-January.
Market sentiment has deteriorated since mid-January as investors assessed the potential
impacts of the Coronavirus (COVID – 19) outbreak. Despite this the US held up
relatively well with the S&P 500 finishing the month flat. However,
emerging markets did suffer losses, especially Latin America and China in
anticipation of economic growth fallout from the outbreak.
economy continued to slow during Q4 2019, but the trade agreement between the
US & China and looser financial conditions should help growth in 2020. The
IMF also predicts that global growth will accelerate in 2020 to 3.3% and 3.4%
Banks left policies unchanged in January, the Fed continued to expand its
balance sheet while the ECB and BoJ continued their QE programs. As a result,
global Central Banks are once again net purchasers of assets.
risks eased over the month, mainly due to the US and China finally signing
their “phase one” trade agreement after more than 18 months of negotiations.
This left tariffs on about $370 billion in Chinese goods in place, representing
about three-quarters of China’s exports to the US. After three years of
disputes, Brexit finally took place on January 31 and Britain and the European
Union have taken their first steps toward negotiating a new trade deal. The
50th World Economic Forum annual meeting took place in Davos, Switzerland where
the climate crisis and trade disruptions were key topics.
underperformed in January, and equities underperformed high yield and emerging
market debt. US Treasuries and gold posted positive returns while commodities
sold off in January. The US dollar gained broadly, most significantly against
the euro, British pound and emerging market currencies. Equity and bond
volatility picked up in January but remained below historical norms.
view for global growth remains a gradual pick up to trend over 2020 but the
impact of the Coronavirus is certainly going to detract from growth in the
first half of the year at least. In this scenario, some of the lost growth is
likely to be recovered in the second half of the year. China’s economy amounts
to over 15% of global GDP, up from 4% during the SARS epidemic back in 2002/03.
Growth across China’s major trading partners is likely to come under more
threat, given their interdependence with the Chinese economy, especially in the
services sector. As an example, regarding tourism, China’s estimated
contribution to aggregate GDP of Australia, New Zealand, Japan, Thailand,
Korea, Singapore and Malaysia ranges between 3% to 10%. Chinese inbound visits
as a proportion of total visits range between an estimated 15% and 35% for
these countries. Direct first order effects will likely be material and second
order effects are also likely.
We believe that
volatility is likely to remain elevated in equity markets and the Chinese Yuan
over the coming weeks as more news on the virus emerges. The impact has been
felt across both domestic and international markets and to a large degree
reflects the temporary reduction in global growth. China accounts for roughly
35% of the MSCI Emerging Markets Index, and Asian equities constitute the vast
majority of this index. Due to this, it is likely emerging markets will be most
directly impacted by any perceived deterioration in the situation. Provided the
virus does not spread too far beyond China, and disruptions to economic
activity are only temporary, markets should begin to look past the short term
Scheme Year to date performance is the period from 1 June 2019 to the most recent month shown.
1 Year performance is the cumulative performance of the last 12 months to the most recent month shown.
Multi Asset Fund performance assumes no lifestyling.
Performance shown is net of annual management charge.
The investment choices offered by the Trustee will be regularly reviewed and may be varied from time to time.
Before you choose a fund we recommend that you speak to a Financial Adviser. The CERS Trustee preferred Financial Adviser is Milestone Advisory DAC. You can contact them or your own financial adviser to assist you to review your investment choices. You can contact Milestone Advisory DAC via the website www.milestoneadvisory.ie, by post: 4 Clonskeagh Square, Clonskeagh Road, Dublin 14, D14 FH90, by email email@example.com or by phone (01) 4068020. Milestone Advisory DAC t/a Milestone Advisory is regulated by the Central Bank of Ireland.
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